Topics discussed include top ETFs for market conditions, future of Nvidia, money market funds, VIX impact on returns, small caps, market highs, restaurant experiences, shifting interest rates, market sectors, ETF trading trends, martial arts influence on ETF industry, thematic investing, lobbying impact on global markets, and pop culture references.
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Quick takeaways
Low VIX regime suggests positive S&P 500 returns with 81% success rate over next 6-12 months.
Extended market surges indicate average 11% return looking 250 days ahead, boosting bullish investor sentiment.
Rally broadens with diverse sector performance beyond tech, led by companies like Costco, Walmart, and Disney.
Nikkei's new highs linked to Japanese technology advancements and low stock market participation, creating a 'Japan moment'.
Deep dives
Indiscriminate Buying and New Highs Surge in Late December
In late December, there was a surge in the percentage of stocks making a 20-day high, reflecting major momentum and participation across the board. While a short-term pause may follow such overheated conditions, long-term signals indicate the durability of a new bull market.
Low VIX Regime - Don't Fear Low Volatility
Statistically, a low VIX regime, below 20, has shown that over the next six to 12 months, S&P 500 returns average around 10% with a positive outcome 81% of the time. Despite concerns about complacency, history suggests that low volatility does not necessarily lead to negative market returns.
Market Facilities - Extended Surge - Positive Outlook
During times of extended market surges, with the S&P far above the 10% mark, looking 250 days ahead on average results in an 11% return with a positive outcome. This data points to a trend where bullish investors can find encouragement despite concerns over a rally's 'too long, too fast' nature.
Rally Broadening - Dominance Shift Towards Large Cap Techs
Notably, the rally is seen broadening with large-cap tech companies consolidating their gains while other sectors flourish. Iconic companies like Costco, Walmart, Target, and Disney are prominently breaking out to new highs, diversifying the market performance beyond tech-oriented stocks, signaling a widespread market strength.
The Influence of Japan on Stock Markets
The Nikkei reaching new all-time highs has coincided with cultural references like Michael Keaton's roles in movies from the late 1980s, creating a Japan moment. This surge is linked to technology advancements in Japanese trading systems and the country's low stock market participation rate, which is only at 10%.
Intriguing TV Shows to Watch
Recommendations include 'Tokyo Vice' for a deep dive into Japanese crime reporting and 'Mr. & Mrs. Smith' for high-quality acting and writing. 'Tokyo Vice' delves into the world of crime journalism in Japan, while 'Mr. & Mrs. Smith' surprises viewers with its top-notch performances.
Insight into Billionaires Row and MCU History
Books like 'Billionaires Row' expose the opulence of mega-buildings in New York City and the influx of foreign money, particularly from China, influencing real estate. On the other hand, understanding the historical dominance and future shifts in the Marvel Cinematic Universe offers an engaging read with 'MCU'.
On episode 133 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Todd Sohn of Strategas to discuss: the top ETFs to gauge market conditions, what the future holds for Nvidia, money market funds, how the VIX impacts returns, small caps, and much more!
Thanks to the Tema Cardiovascular and Metabolic ETF (HRTS) for sponsoring this episode. Learn more at: https://temaetfs.com/hrts
Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Josh Brown are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management.
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